Employment Loss in Informal Settlements during the Covid-19 Pandemic: Evidence from Chile

Abstract

The Covid-19 pandemic has reached almost every corner of the world. Despite the historical development, approval, and distribution of vaccines in some countries, non-pharmaceutical interventions will remain an essential strategy to control the pandemic until a substantial proportion of the population has immunity. There is increasing evidence of the devastating social and economic effects of the pandemic, particularly on vulnerable communities. Individuals living in urban informal settlements are in a structurally disadvantaged position to cope with a health crisis such as the Covid-19 pandemic. Estimates of this impact are needed to inform and prioritize policy decisions and actions. We study employment loss in informal settlements before and during the Covid-19 pandemic in Chile, using a longitudinal panel study of households living in Chile's informal settlements before and during the health crisis. We show that before the pandemic, 75% of respondents reported being employed. There is a decrease of 30 and 40 percentage points in May and September 2020, respectively. We show that the employment loss is substantially higher for individuals in informal settlements than for the general population and has particularly affected the immigrant population. We also show that the pandemic has triggered neighborhood cooperation within the settlements and that targeted government assistance programs have reached these communities in a limited way. Our results suggest that individuals living in informal settlements are facing severe hardship as a consequence of the pandemic. In addition to providing much-needed support, this crisis presents a unique opportunity for long-term improvements in these marginalized communities.